What is "Call and Put" in the Stock Market?

"Calls" and "puts" are types of options for trading stocks. An option gives the buyer of the option the right to buy a stock from (a call option) or to sell a stock to (a put option) the seller of the option at a specific price, called the strike price.

Exercising a call option forces the seller of the option to sell the underlying stock at the strike price. For example, an investor exercising a $25 call option on a stock valued at $50 buys the stock from the option seller at the lower price and can sell the stock back on the market for a $25 profit. The value of a call option moves in the same direction as the underlying stock price.

Exercising a put option forces the seller of the option to buy the underlying stock at the strike price. An investor exercising a $50 put option on a stock valued at $25 buys the stock from the market at the lower price and sells the stock to the option seller for a $25 profit. The value of a put option moves in the opposite direction as the underlying stock price.

An option contract has no value when the strike price is below the stock price in a put option or above the stock price in a call option. All options specify an expiration date, and the buyer of the option can exercise the option at any point up to and including that time.